Deloitte EHIC 2015: Customer innovation and service interaction

With Europe and London in particular having an exceptional year
of hotel transactions so far, it was no surprise Deloitte's 27th
European Hotel Investment Conference attracted a 'full house'
buzzing with activity. This year's theme 'Changing gears: a new
era? reflected the tone. According to Deloitte, in Europe since
2008, there has been €11 billion ($12 billion) worth of investment
solely in the luxury end of the hotel market, and London continues
to be the main target of this investment. Deloitte's Nick van
Marken added that there are to be a further 2,500 luxury keys in
the UK capital by 2021 and that comes with a further £3 billion
($4.6 billion) of investment.

The Innovators - In Overdrive?

One of the most interesting panel discussions - The innovators -
in overdrive?, featured Allie Hope, Head of Development, Virgin
Hotels; Michael Levie, COO, citizenM and Sharan Pasricha, CEO, The
Hoxton, was moderated by Simon Oaten, Partner, Deloitte.

Oaten introduced the session, highlighting how the hotel sector
is ripe for innovation - "that special piece, the juice, magic
dust, that allows a company to grow faster at a better rate, margin
and higher contribution."

Technology and Digital

Levie, who always
contributes to an engaging conversation didn't disappoint and took
a cautionary approach quoting Dr. KH Kim ,"87% of innovation
fails within the first year - it's good if it works, but this could
be very different" he said.

"Citizen M
doesn't change underlying business processes, we look at different
business propositions that forces the process (of innovation).
Technology is important, and we (hoteliers) are not good at that -
data is foreign. Citizen M focuses on experience and distribution
technology."

Moving to Virgin Hotels
Hope said the brand's focus is on the variety of customer
touchpoints and engagement pre, during and post stay, and how to do
things differently, "we leverage technology and we don't look to
design our own - ours is more 'plug and play' that the customer
controls. Our community approach is based on guest interaction, and
buying decisions based on like minded individuals" said Hope.

Pasricha's approach had a clear insourcing and digital strategy,
saying, "we view Hoxton Hotels as a
developer, operator and digital studio. We insource web
development, analytics and marketing functions - we're heavily
focused on digital. Public areas are relevant and vibrant, and we
aim to bring the outside neighbourhood onto property. We aim to
'stitch' the customer journey together. We stay clear of leading on
property technology innovation - our in room technology use updates
made in the residential property sector as a guide."

OTA's and Distribution

Oaten then moved the conversation onto OTA's and the
distribution of hotel room inventory.

"We aim to keep pace with OTA's and sell by segmentation" said
Levie, continuing "corporate rates is a volume business, if 70% of
your hotel inventory is being discounted on historical data with no
segmentation it's not a good position to be in. The budget airlines
do a good job, and there are currently no systems to aggregate
hotel data, although this will change soon. OTA's do lots of work,
they're smart, we hoteliers are in the dark ages. OTA's are your
billboard, they are the coccaine of the industry - you become
addicted, go to the clinic and get clean!" he concluded to shrieks
of laughter from the audience.

Pasricha's approach to OTA's and distribution was more focussed
on how OTA's fit into The Hoxton's overall digital strategy , " we
use OTA's as 'taps' to turn off when we need to. We spend a
disproportionate investment on digital understanding engagement. It
provides us with insights and optimisation" he said

Hope was less complementary to OTA's, " with only 70 million
customers, we are looking at how to best tap into them. OTAs a
necessary evil."

Levie countered saying, "OTA's are not a necessary evil,
hoteliers have no clue their spend on distribution. If a
brand delivers - great. A brand doesn't allow digital acquisition.
Hoteliers have distribution choices, use OTA's to position yourself
and know your distribution cost. Promoting through different
channels at a different cost increases promiscuity"

Short Term Rental and Extended Stay

In a Deloitte hospitality survey prior to the conference, only
16% of their clients said they "worried about Airbnb" and the short term rental
sector's impact on hotel performance. Hope outlining that Virgin US
had 50 residential units, said " we sit on the fence with Airbnb
distribution, we're very much thinking about it. Our guests are 70%
business customers, we offer a residential feel, guests tend to
stay longer for family and 'bleisure', and
we have a strong wellness component, and target Marriott customers
who maybe feel slightly alienated."

Importance of People

Oaten then asked the group about the importance of people within
a hotel organisation. "They're our 'special juice' said Hope,
"people are at the core of everything we do. Finding talent is
difficult. We hire on attitude, and personality traits. We try to
find the mentality of each member of the team - it's their energy
and personality that drives profitability, we let them do it their
own way. The number of quality people available allows us to cherry
pick" said Hope.

Pasricha said Hoxton Hotels overinvest and overspend on people,
spending around 20% of total budget, recruiting more non-hoteliers,
than hoteliers and consciously placing less focus on recruiting
direct from hospitality, "we aim for good IQ / EQ balance - if they
are smart enough, they will figure it out, and our team immerse
themselves in the open neighbourhood."

Guest Profile

Touching on marketing and guest profile, Pasricha said Hoxton
Hotels' room sales were evenly split between corporate and leisure.
Our public places attract a local audience, meetings and events
too, "we have a great product and proposition - we're more
inclusively democratic than exclusive, and aim to keep it simple
because we're just selling sleep".

CitizenM targets frequent travellers, and the mid market. "If
the curtain and bedspread are the same colour and material, you
know you''re staying in a bad space" said Levie to hoots of
laughter. "We allow our guests to find us and vice versa, this is
critical - it takes guest satisfaction way up. Be clear what you
are not, say 'no' - we don't want to prompt disappointment" said
Levie.

In closing Oaten asked the audience what they felt would be the
most important hotel innovation of the future - technology or
people? The audience 'spoke' with around 20% choosing technology,
and 80% people innovation. Panelists disagreed, with Pashricha and
Hope selecting 'people' and Levie both technology and people.